In a cannabis industry hurting because of a black market that can sell consumers two to three times the amount of products at half the price licensed dispensaries can offer, education will be key in California.
That was the message during a panel discussion on public safety at the Westin hotel in Downtown Long Beach on Wednesday, hosted by the local cannabis trade group the Long Beach Collective Association.
The event featured local and statewide cannabis industry professionals and promoted an education campaign called #WeedWise that the state’s newly formed Bureau of Cannabis Control launched this spring.
“Consumers want the most for their money, but when buying illegal they are getting more, but more of what?” asked Steve Neal, executive director of the LBCA and former Long Beach councilman, who served as the event’s moderator.
That “what” from legal businesses is expensive lab-tested cannabis products mandated by the state that makes sure consumers are not taking in toxins and contaminants.
Early on, businesses who made the effort to become legal faced harsh competition with those who continued to sell underground, avoiding double-digit taxes on their products and ever-changing rules and regulations on everything from packaging to labeling.
Municipalities soon tried different methods of shutting down illegal dispensaries, like turning off a business’ water and electricity, in addition to police raids.
However, those illegal storefronts quickly turned into illegal delivery services, noted Melahat Rafiei, executive director of the Santa Ana Cannabis Association.
“It’s like whack a mole,” Rafiei said of the deliveries popping up.
Going after delivery services has proven to be more difficult, said Lori Ajax, who heads the Bureau of Cannabis Control, because there’s no physical address attached to the name, just a phone number and email.
The latest obstacle facing the legal market is counterfeit products, especially vape pens and packaging.
These companies are not only doing a good job of counterfeiting a brand, but harming the brand as well when issues arise, Ajax said.
That’s where the #WeedWise ad campaign comes in, according to Ajax. Its aim is to educate consumers, families and key influencers about the dangers that come with untested, unlicensed products and to encourage unlicensed operators to get licensed or cease operations.
Ajax said her bureau will continue to go after those “who have no intention to go legal” and asked the legal operators to help by reporting illegal players.
“You’re our best eyes,” Ajax said.
A recent report from the LA Times noted that the bureau has received 38 complaints about counterfeit products while the state Department of Public Health said it received 21 similar reports since this May.
Ajay Kolluri, who is the cannabis program manager in the city’s Office of Cannabis Oversight, said the city has not received any complaints about knockoffs to date but has opened 20 investigations against unlicensed dispensaries in Long Beach since 2017.
The legal industry is also counting on new and “cleaned up” legislation on the local and statewide level to make legal dispensaries more competitive.
Recently, legal operators scored a victory when Weedmaps announced it would no longer allow black-market businesses to advertise on its site after pressure from state regulators and licensed businesses, according to the Associated Press.
Locally, cannabis laws may be harder to change.
Kolluri said that since Long Beach’s cannabis ordinance was voter-driven the city would need to go back to the voters to tweak anything, including tax rates.
“We’re the most highly regulated, highly taxed industry in the world,” said Ruben Honig, executive director of the United Cannabis Business Association. “We have to keep fighting.”
Honig said that includes working to make the industry’s voice heard.
“Playing small ball is over, bigger industry is coming in,” Honig said. “The days of mom-and-pop stores is probably over.”
Needing upwards of $1 million in capital to start, cannabis businesses may seem like anything but mom-and-pop shops, but it’s no wonder when these distressed businesses take payouts after investing so much time and money, multiple panelists noted.
In Long Beach, the family owned dispensary One Love Beach Club was purchased by the retailer chain MedMen for $13 million. The reason behind the purchase was not publicly announced but the storefront was owned and operated by the Abrams family for 10 years.
When asked by 1st District Council candidate Elliot Gonzales about the role of equity in the campaign—especially for those who have been disproportionately affected by the government’s War on Drugs campaign—Ajax revealed that the bureau will begin providing $10 million in funding to local jurisdictions based on their scoring on equity applications.
Ajax said each jurisdiction will have discretion on how to use the money, which would be sent out in 30 to 45 days. Gov. Gavin Newsom once again added money for the equity program for the next fiscal year.
Kolluri added that the city’s Cannabis Social Equity Program gives qualified applicants fee waivers and expedited approvals among other benefits that can at least provide a nudge.
To learn more about the #WeedWise campaign or to report illegal cannabis businesses to the BCC click here.